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This guide is for people living in blocks of flats, whether a small conversion or a large purpose-built unit, where they are leaseholders subject to the payment of service charges. It aims to provide basic guidance on how to go about appointing and employing a managing agent. It is particularly relevant if you are a director of a resident management or right to manage company.

Introduction

Flat-owners may acquire management responsibilities in different ways: through acquisition of the freehold of the building, through the statutory Right to Manage (RTM) or simply by delegation of the management responsibilities from the landlord. Whatever the route, the management is normally exercised through some form of resident management company (RMC).

The RMC will assume responsibility for the management and repair of the building, and for compliance with the obligations of the lease and the wide range of relevant statutory requirements. It will have to assess how best to achieve this, through self-management or by the appointment of a professional managing agent.

This guide is intended as a general guide only and is not a substitute for legal advice; specific problems should be referred directly to any of the contributory organisations as appropriate; where they cannot assist, you are recommended to seek advice from a solicitor.

The role of a managing agent

The role of a managing agent today is a complex one and requires a professional approach. To carry out the role requires knowledge of landlord and tenant law, building construction, health and safety regulations, basic accounting and more.

There are benefits of professional management which should be balanced against the fees which leaseholders will have to bear.

Benefits of using an agent

Appointing a managing agent

Here are some ideas for the process of finding an agent that suits you. Not all may be appropriate to your situation.

  1. Draw up a schedule of the services you want from a prospective agent. See Appendix 1 for a checklist.
  2. Seek recommendations from other lessees in your block and elsewhere.
  3. Go to websites of possible agents and get basic information from this source. Check the First-tier Tribunal (Property Chamber) cases website for agents’ names appearing.
  4. Invite possible agents in for an informal meeting first before asking for a formal tender.
    • It will help these informal meetings greatly if you can get hold of a copy of a standard lease for the block and of the annual statement of account for service charges. Any good agent will want to look at these.
    • Explain any problems that you think will need to be tackled, current debtors, relations with current agent, state of finances of the scheme. Any good agent will want to ask you relevant questions to establish what might be being taken on.
    • How well the agent can offer ways to tackle existing problems is a good test of what he/she can do for you.
    • Who will be your contact if that agent takes on management? You want to meet that person or persons to see if you can work with them. What happens if that person is sick or on holiday?
    • Who will handle phone calls or emails from the directors and lessees?
    • Who will choose which contractors are used for the block? Do you want to retain final approval?
    • Ask about disclosure of commissions including insurance if this is something you want the agent to arrange for you. Agents should not take any commissions from service contracts unless they are agreed in advance by the RMC’s directors.
    • How often will you get financial reports on the service charge income and expenditure? Will you be able to see the invoices and receipts documents at regular intervals?
    • Some other possible relevant questions are in Appendix 3.
  5. Speak to RMC directors in other blocks managed by the agents you then may invite to tender as the next stage. Or check out any references or testimonials you have been given.
  6. Formal tender stage – see Appendix 2 for a draft letter to use.
  7. Contract stage – both the Association of Residential Managing Agents (ARMA) and the Royal Institution of Chartered Surveyors (RICS) have model management contracts/agreements. Make sure you include in the contract a list of documents that will have to be passed on if the contract ends.

Getting the best from a managing agent

The agent cannot work in a vacuum and it is critical to future management arrangements to establish at the outset:

Both the individual leaseholders and the agent should be clear as to from whom instruction is to be received. An agent cannot work if expected to receive instructions from all lessees. The usual and most effective arrangement is for the agent to attend, and report to, meetings of the Board of the RMC. In between meetings the Board could nominate one of its directors to be the main point of contact. By treating the agent as a form of general manager, he or she will provide useful input to policy and take overall responsibility for day-to-day affairs. Meetings should be properly organised and the Board’s instructions to the agent clearly minuted. The Board should set clear lines of communication, understood and observed by both sides.

Remember that the agent cannot take instructions from the Board that would put him in breach of any landlord and tenant law, code of practice or other statutory guidance eg health and safety legislation.

The Board should also establish how the agent is to respond to questions from individual residents and his/her accountability to those individuals. The residents should be clearly informed by the Board of the identity of the agent, duties and limits of authority. Although the agent will be working for the residents as a whole, the employer is the Board, and the residents must be clear that the agent carries the authority and support of the Board in all his/her actions. The agent should not be placed in any position of ambiguity in dealing with individual flat-owners and, of course, cannot take instructions from them.

Agents’ qualifications

Professional qualifications to look out for in some of the persons working for managing agents include membership of the Institute of Residential Property Management, RICS, or, in the social housing sector, the Chartered Institute of Housing.

For firms of agents look out for membership of certain established professional trade bodies. Many agents are members of ARMA and/or are regulated by RICS, or those who specialise in the management of retirement schemes may be members of the Association of Retirement Housing Managers (ARHM).

The advantages of the membership of a recognised professional organisation are:

Agents’ insurances

It is important to confirm the prospective agent’s professional indemnity insurance. If the agent is a member of a professional or trade association, professional indemnity insurance will be an automatic condition of membership. However, the existence of the cover, and its extent, should be checked. Where a resident management company delegates tasks to a managing agent, the residents’ company will remain legally answerable for any neglect, omission or mistake by the agent and should be sure that the agent has the means for compensation or damages.

Codes of practice

Management of residential leasehold property should be in accordance with approved Codes of Practice. The Government has, to date, approved two Codes of Practice for residential leasehold housing, one produced by ARHM relating to retirement housing schemes and one by RICS relevant to all lessees paying variable service charges not on retirement schemes. When appointing an agent, always ask the agent to confirm that he/she complies with the relevant code. Members of ARMA agree to follow one or both of these codes of practice.

The contract/management agreement

You could ask your solicitor to draw up a contract for you. Alternatively agents use one of several models developed by the relevant professional bodies that cover most situations and can be adapted by you.

Removing an existing agent before appointing a new one

If you are unhappy with the current agent then have you tried using its complaint handling procedure and ombudsman, if available?

If you are so unhappy that you decide you want to change agents, here are some things to consider before making this decision:

Appendix 1

Checklist of possible services required from managing agents

Financial

Relationship with residents

Repair and maintenance management

Lease Compliance

Staff management

Landlord and tenant advice

Board Support

Appendix 2

Sample covering letter inviting tenders

Addressee

(Company or association’s letterhead with contact address and phone/fax numbers and, if to be used, email address)

Date

Dear……………………….

Re: (Name and address of block)

We are in the process of reviewing the appointment of a managing agent. Descriptions of the property and services required are enclosed (for guidance only) along with a questionnaire; these will be used to evaluate tenders on a like-for-like basis (please note that the cost of your service will be a key element or the quality of the service provided will be considered as important as the cost).

In addition we enclose a copy of a standard lease for the block and of the most recent annual service charge accounts.

If you would be interested in applying, could you let me know when you would be available for an initial meeting; it would be most helpful if you could let me know in writing not later than (date). Subsequently we may wish to visit the offices of shortlisted applicants.

Any further information you require may be obtained from (name) at the above address.

We look forward to hearing from you shortly.

Yours sincerely

(Signature)

(Name and position)

Appendix 3

Checklist of possible questions to ask prospective managing agents

About this guide

This guide has been produced as a joint publication by ARMA, the Association of Residential Managing Agents, ARHM, the Association of Retirement Housing Managers and LEASE, the Leasehold Advisory Service.

ARMA , the Association of Residential Managing Agents, is the leading trade body in England and Wales that focuses exclusively on matters relating to the block management of residential property, whether for landlords or resident management companies. Members agree to adopt and comply with the principal objectives of the Association and undertake to follow the Code of Practice issued by the Royal Institution of Chartered Surveyors. The Association promotes and encourages consistent standards of practice by its members and provides a platform for developing and contributing to public debate on new legislation concerning management issues. All its members offer access to an independent ombudsman scheme.

ARHM, the Association of Retirement Housing Managers, is the body for managers and landlords of leasehold schemes for retired people, including resident management companies. Its members agree to comply with its Code of Practice for private retirement schemes and to offer leaseholders access to an independent ombudsman scheme.

LEASE provides free advice and guidance to leaseholders and landlords on all aspects of leasehold law, including problems with service charges, forfeiture and rights to lease extension and freehold acquisition. LEASE is funded by the Department for Communities and Local Government and the Welsh Government.

Published September 2013

Useful addresses

The First-tier tribunal – Property Chamber

Website: http://www.justice.gov.uk/tribunals/residential-property

Wales:

1st Floor, West Wing, Southgate House, Wood Street, Cardiff CF10 1EW Tel: 029 2092 2777 Fax: 029 2023 6146 Email: [email protected] Website: www.wales.gov.uk

Other useful addresses

Her Majesty’s Stationery Office (HMSO)

Copies of all legislation regulations and other official publications can be downloaded from www.legislation.gov.uk. Alternatively printed copies can be purchased from:

The Stationery Office Ltd (TSO), PO Box 29, Norwich, NR3 1GN) Tel: 0870 600 5522 Online ordering: www.tsoshop.co.uk

Association of Residential Managing Agents (ARMA)

3rd Floor, 2–4 St George’s Road, Wimbledon, London SW19 4DP
Tel: 020 7978 2607 Fax: 0207 498 6153 Email: [email protected] Website: www.arma.org.uk

Association of Retirement Housing Managers (ARHM)

c/o EAC, 3rd Floor, 89 Albert Embankment, London, SE1 7TP Tel: 020 7463 0660 Fax: 020 7463 0661 Email: [email protected] Website: www.arhm.org

The Royal Institution of Chartered Surveyors (RICS)

12 Great George Street, Parliament Square, London SW1P 3AD Tel: 020 7222 7000 Website: www.rics.org

The Federation of Private Residents’ Associations

PO Box 10271, Epping CM16 9DB Tel: 0871 200 3324 Email: [email protected] Website: www.fpra.org.uk

LEASE is governed by a board, appointed as individuals by the Secretary of State for the Ministry of Housing, Communities & Local Government.

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